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Philip Viscount Snowden's Autobiography - Chapter LXIII
'The Hague Conference'

The most defining moment in his Political Career.

The Hague Conference

I come now to the story of what was perhaps the most sensational episode in my career; an episode which to my great surprise brought me for a time into world-wide notoriety. This was the Reparations Conference which was held at The Hague in the month of August 1929.

Perhaps I had better begin with a brief statement of the events which led to the calling of this Conference. Ever since the end of the War the question of Reparations and War Debts had caused considerable trouble. A great many International Conferences had been held on these matters, but no working and permanent settlement of Reparations had been reached. The Peace Conference met in Paris after the War in an atmosphere still charged with war passions. Fantastic ideas were then entertained as to the possibility of compelling the defeated Powers to pay the whole cost of the War. These ideas were soon found to be vain delusions, and the successive Conferences on the subject made unsuccessful efforts to reduce the amount of Reparations to be exacted from Germany to a limit which might be within her capacity to pay.

Three years after the end of the War some wiser heads began to realise that the whole idea of exacting Reparations and discharging War Debts was financially and economically impossible without inflicting injury upon debtor and creditor alike. On the 1st August 1922, the British Government made a bold and statesmanlike declaration on the subject, which was embodied in a Note addressed by Lord Balfour to our European Allies in the War. This document insisted upon the relationship between Reparations and Inter-Allied Debts; and set forth in plain language the British view of the problem. It was pointed out that up to that time the British Govern­ment had abstained from making any demands upon their Allies either for the payment of interest or the repayment of capital on the debts due to Great Britain. In the meantime Great Britain had been required to meet her obligations to the United States. In this Note the British Government announced that they were pre­pared, if such a policy formed part of a satisfactory international settlement, to remit all debts due to Great Britain by her Allies in respect of Loans, or by Germany in respect of Reparations. This magnificent offer met with no response either from the Allied countries or from the United States.

Further efforts were made to place the Reparations Payments on a more practical basis, culminating in the London Conference held in July 1924, to put the Dawes Scheme into operation. The Dawes Plan was never regarded as being of more than a temporary character. It involved serious interference by the Creditor Powers with the economic and commercial affairs of Germany, and even those who fixed the figure which was to be paid by Germany had grave doubts as to whether it would be within the capacity of Germany to meet these obligations, and especially whether it would be possible to transfer the payments to the creditors without seriously upsetting the International Exchanges.

The question of revising the Dawes Plan was first raised by Mr. Parker Gilbert, the Agent-General for Reparations, in his Report on the working of the Plan published in December 1927. He urged the advisability of opening up negotiations for this purpose between the German and the ex-Allied Governments. No further step towards a revision of the Dawes Plan was taken until September of the following year (1928), when during the sitting of the League of Nations Assembly at Geneva the German Ministers raised the question of the Evacua­tion of the Rhineland. The French Government insisted that the Evacuation of the Rhineland could not be con­sidered until the matter of German Reparations had been placed in a more satisfactory position. It was finally agreed that there should be parallel discussions about evacuation and about a final settlement of Reparations, and that a Committee of Experts should be appointed to draw up proposals for a complete and final settlement of the Reparation problem. Negotiations on the matter took place between Mr. Churchill (who was then Chan­cellor of the Exchequer) and M. Poincare. In connection with these negotiations Mr. Churchill visited Paris, and finally Notes were exchanged between the two Govern­ments placing on record their points of view in regard to a final settlement of Reparations.

It is important here to note, in view of the controversy which arose at The Hague Conference, that Mr. Churchill insisted that in any alteration of the amount of the Annuities to be paid by Germany the distribution of these Annuities between the different Creditor Nations should be based upon the percentage which had been fixed by agreement at the Spa Conference held in 1920, and which since then had been maintained in all the Reparation Plans. He also insisted that full cover from Reparations and Allied Debt payments should be assured under any new Plan. He pointed out that up to that time the British payments on her Debt to America had exceeded our receipts from Reparations and Allied Debts by £180,000,000, and he insisted that the British Government must reserve their right to deal with this deficiency and to recover supplementary payments over and above their current debt liabilities.

When I come to deal with the proposals of the Young Committee, which was the outcome of these negotiations, it will be seen that in demanding amendments to their Report at the Hague Conference I was doing no more than acting upon the policy of the British Government, with which the Allied Governments ought to have been familiar.

The new Committee of Experts, charged with the duty of drawing up proposals for a complete and final settle­ment of the Reparations problem, was formally appointed on the 19th January 1929, and it first met on the 9th February. The Chairman of this Committee was Mr. Owen Young, an American, and it consisted of ten other members—two Belgians, two French, two Germans, two Italians and two British. The British members of the Committee were Sir Josiah Stamp and Lord Revel-stoke—who unfortunately died before the Committee reported, and his place was taken by Sir Charles Addis. This Committee sat for four months and, according to all reports, its proceedings were not of a very harmonious nature. Each of the Allied members of the Committee who had been appointed by their respective Governments, and who regarded it their duty to get as much as they could for their own country, put forward claims which, if satisfied, would have resulted not in a decrease in the amount of Reparations Germany would have to pay, but an increase in the full Dawes Annuity from £125,000,000 to £150,000,000. It had been made quite plain that the two British members of the Committee were in no sense representatives of the British Government. They had been appointed to give their expert knowledge to the problem of what sum Germany might be able to pay. The opposition to the unreasonable claims put forward by the representatives of the Latin Governments had to be contested mainly by Sir Josiah Stamp, who during these four months had a most strenuous and unpleasant time. He has since made it known that he eventually agreed to proposals demanded by the Latins in order to avoid a total break-down of the Committee.

It leaked out in the Press at the beginning of May, while the Committee was still sitting, that in order to reconcile difficulties and to meet the demands of the French, Italians and Belgians, the chairman had produced a fresh scheme. Under this scheme the average share of the British Empire was to be reduced to a figure which would fail to cover even our future Debt Payments. When this became known there was a storm of protest from all shades of opinion in this country, and Mr. Churchill was questioned upon it in the House of Commons. He stated that the British Government was in no way bound by the recommendations of the Committee of Experts, and he made it quite clear that there could be no chance of any such proposals being accepted by this country. Eventually fresh proposals for the distribution of the Annuities were made which slightly increased the share of the British Empire.

Anyone who has had experience of such Committees can understand quite well how it came to pass that the recommendations of the Committee were so unfavourable to Great Britain. The representatives of France, Belgium and Italy on the Committee were a solid block, and by insistence upon their demands they wore down the opposition and reduced the chairman to a state of almost complete nervous prostration. Finally, to prevent a com­plete break-down, the British members of the Committee had to accept a Report with some points on which they did not agree, and which they quite realised involved unfair sacrifices on the part of Great Britain.

In order to get an understanding of the matters which caused such acute differences in the Hague Conference, I will try to make as plain as possible the objections of the British Government to certain proposals of the Young Report.

The Report fixed the amount of the payments to be made by Germany at an average of £100,000,000 a year over the next fifty-nine years. This was a reduction of about 20 per cent, upon the Annuities under the Dawes Plan. This reduction in the German payments was accepted by the British Government, but we took the position that so long as Reparations were paid they must be fairly distributed amongst the Creditor Powers. This question of the distribution had been hotly debated in the earlier Conferences. Two years after the War, at a Conference at Spa in 1920 a scale of distribution among the Creditor Powers was agreed upon. The percentage of Reparations allotted to Great Britain under the Spa Agreement was substantially below the percentage to which Great Britain was entitled on merits. But it was accepted, and although the system of German pay­ments had been altered at least four times in the subse­quent eight years, the Spa scale of distribution had been maintained. The Young Report recommended a change in the percentage of distribution of the Annuities which would reduce the shares of the United Kingdom, the United States of America, and some of the smaller Powers by £2,000,000 a year for thirty-seven years, and Great Britain's loss was to be distributed amongst France, Italy and Belgium, the major part of the advantage going to Italy.

There was a further feature of the Young Report to which the British Government took strong exception. It was proposed to divide the German Annuities into two  classes—Conditional and Unconditional Annuities.

About one-third of the total Annuities—equal to a sum of £33,000,000—was to be placed in the category of Unconditional, and was to take priority of payment over the other two-thirds. Five sixths of this prior charge was allotted to France. Italy was to get about £2,000,000 a year, and the remainder, amounting to less than £2,000,000, was to be distributed amongst all the other Creditor Powers. The purpose of dividing the Annuities into two categories, giving absolute security for the receipt of the unconditional part, was to enable the countries receiving these payments to fund them into a Capital Debt against Germany. It was extremely unlikely that Germany would be able to maintain the regular payments of the whole of the Annuities, and, as practically the whole of Great Britain's share of the Annuities was to come from the postponable part, while half of the share of France was guaranteed against postponement, France in this respect was placed at a great advantage compared with Great Britain.

The other part of the Report to which the British attached importance was that dealing with the payments of Annuities in kind. This method of paying Reparations was especially disadvantageous to Great Britain, as these exports from Germany entered into competition with British exports.

These were the three principal matters in the Report to which the British Government took strong exception, and the British Delegation went to the Hague Conference with the authority of the Cabinet to insist on such adjust­ments of these matters as would secure justice to this country. A delegation to a Conference of this character must necessarily be given a certain measure of liberty, within their general instructions, to deal with matters which may unexpectedly arise, and with developments that cannot have been foreseen. It was understood that if the British Delegation found it impossible to secure the acceptance of their demands, and if the break-down of the Conference seemed likely, the British Delegation would refer to their Cabinet colleagues for further instructions.

A week before the Delegation left for The Hague, the Young Report was raised in a debate in the House of Commons by Mr. Lloyd George, who took exception to the three points in the Report to which I have just referred. In replying to this Debate I left no doubt that the Government took the view on these matters which Mr. Lloyd George had stated, and I concluded by saying: " I am expressing my own view, and, I think, the view of the Government, when I say that the limit of con­cession by this country has been reached." The outcome of this debate made it quite clear that the three points would be raised at the Conference by the British Delega­tion; and it came as a great surprise to me when the matters were raised at the Conference that the foreign delegates appeared to be in complete ignorance of the attitude of the British Government in regard to them.

The British Delegation left for the Hague on Sunday, the 4th August. We arrived on the Sunday evening, and were received at the station by the British Minister, and on behalf of the Dutch Government by M. Beelaerts van Blokland, the Foreign Minister. We had to submit to the usual infliction of being photographed, and then proceeded to our headquarters at the Grand Hotel, Scheveningen, a seaside resort two or three miles from The Hague.

The formal opening of the Conference had been fixed for Tuesday morning, the 6th August. The Dutch Parliament was not then in session, and the Govern­ment   had   very   generously   placed   the   Parliamentary buildings in the Binnenhof at the service of the Conference.

On the evening before the Conference assembled, the heads of the six principal Powers, including Germany, met at the hotel at which the French Delegates were staying for an informal talk about the proceedings of the Conference. This was the first occasion on which I had met M. Briand, and M. Jaspar, the principal Belgian delegate. I renewed my acquaintance with Dr. Strese-mann who, I was pained to see, was obviously in a very poor state of health. We discussed at this informal gathering the question of the Chairmanship of the Con­ference, and the appointment of a Secretary-General. In regard to the latter appointment there were no differences of opinion as to the man beyond all others best qualified to fill that important post. Sir Maurice Hankey was well known to the foreign delegates, who had met him when acting in a similar capacity at many previous international conferences. In regard to the Chairman­ship of the Conference arrangements were made which, however, were never carried through, that the chair should be occupied successively by the heads of the principal Delegations.

M. Jaspar, the principal Belgian delegate, was selected to take the chair at the first plenary session of the Con­ference, a position he accepted in complete innocence of the onerous duties he was undertaking.

M. Jaspar had a head of hair which reminded one of Mr. Lloyd George, and this resemblance had led at a previous Conference at Cannes to an amusing incident. Two Englishwomen saw M. Jaspar, who they believed was Mr. Lloyd George, enter a barber's shop. They waited outside, and when M. Jaspar emerged they went into the barber's shop and begged for a lock of hair which had been cut from the gentleman's head who had just gone out. This was given to them, and it is very likely to this day two Englishwomen are wearing a lock of M. Jaspar's hair in the belief that they are treasuring a lock of Mr. Lloyd George's!

The arrival of the delegates for the opening session the following morning was watched by vast and cheering crowds. On this occasion the public were admitted to the galleries, as the proceedings were to be of a purely formal character. There were thirty-three chief delegates at the Conference, representing fourteen nations. The Dutch Foreign Minister welcomed the Conference on behalf of the Government and the Queen to the calm and peaceful atmosphere of The Hague. M. Briand, as the senior Minister among the delegates, followed with one of his appropriate little orations. He referred to The Hague as a symbol of peace, and " here ", he added, " is a propitious atmosphere in which to serve the cause of humanity, and to make yet another effort to promote peace and good-will between the nations which have by sad experience learned that war is bad business, even for victors." Dr. Stresemann followed, and, though physic­ally weak, made a bold speech in which he referred indirectly, but still quite pointedly, to the idea which M. Briand had recently put of a " United States of Europe ". I followed with a very brief speech in which I expressed regret that M. Poincare and Herr Mueller, the German Chancellor, were prevented by illness from attending the gathering, and I congratulated Holland upon being free from the necessity of taking part in the proceedings, and expressed the conviction that though Holland was not directly concerned with such trouble­some problems as Reparations, she, like all nations, would benefit by a just and satisfactory settlement of the problems before the Conference. After these for­malities   the   opening  session  came to  an end, to be resumed   for   business   purposes  at  four  o'clock  that afternoon.

It had been decided that the business sessions of the Conference should be held in private, though it was soon discovered that it might have been better if the Press had been admitted. It was impossible to keep the pro­ceedings and debates of the Conference secret. There were scores of Press men from all parts of the world assembled at The Hague, and, being denied access to the meetings of the Conference, they were driven upon other resources for their information. With the exception of Great Britain, all the other Delegations had brought with them strongly staffed and highly efficient Press depart­ments, and they had also perfect arrangements for meeting the Press representatives from their respective countries and putting them in possession of the news they wanted circulated in their own countries. Nothing transpired at the Conference which was not immediately conveyed to the foreign Press representatives, and, naturally, coloured by the impression they wished to make upon the people of their respective countries. The British Delega­tion were driven to adopt similar methods, although our Press department was never so elaborate as that of the other Delegations.

At four o'clock that afternoon the first business session of the Delegates assembled under the chairmanship of M. Jaspar. I thought it desirable that the British attitude towards the Young Plan should be stated at the outset of the proceedings, and I rose at once for that purpose. In view of the impression which my statement made on the Conference and the sensation it created throughout the world, it might be well if I reproduce the fairly full report of my remarks which was afterwards communicated to the Press.   I began by saying:

"The experts had stated that the Young Report must be regarded as indivisible and must be accepted as a whole, but I was afraid that if the Conference accepted that statement and took the proposals as they now stood, they would have to follow in some respects an inconsistent and rather contradictory decision. The British experts were not Government servants, and the British Government was in no way committed to adopt the committee's recommendations.

" The views of the British Government were that the annuities which had been fixed were not beyond Germany's capacity to pay. If a difficulty should arise, it would not be in Germany finding it difficult to obtain the money, but because Germany could not pay the money into the creditors' pockets.

"The abolition of financial control was heartily welcomed by the British Government. As regards financial security, this was now based upon a solemn undertaking by the German nation, which also was a departure from that laid down by the Treaty of Versailles. There were a few safeguards in case of difficulties, which 1 hoped and believed would not arise, and I was glad that the sanctions had been removed.

"The British Government had no objection to the volume and the amount of the annuities, but it objected to the proposal to divide the amount into two categories. So long as conditional annuities were being paid it did not matter much, because all nations were getting their money, but unconditional annuities carried the right of mobilisation, and therefore attained greater security than the conditional annuities.

"The British Government objected to the present proposed division whereby France got five-sixths of the unconditional annuities and Italy had a very considerable sum amounting to £2,000,000 annually, which was much larger than her revenue under the Dawes Plan. There remained a perfectly negligible part to be divided among the other creditor Powers. I hoped they would forgive me for speaking frankly and firmly. The division was utterly indefensible, and the Experts themselves had made no attempt whatever to explain it or to justify or to defend it. The British Government attached the greatest possible im­portance to the proposed modifications which had been made in the distribution of annuities among the various creditor nations, and which was a departure from agreements which already existed, and, unfortunately, this division was very much to the disadvantage of certain creditor countries and very much to the advantage of other creditor countries. Great Britain was a very heavy sufferer from these suggested alterations in the distribu­tion of annuities, and some of the smaller nations would also suffer. That was in one respect very unfortunate, because the small nations who were now asked to make sacrifices in their percentages were not represented at the Experts' Conference.

" This was the first time that a suggestion had ever been made that there should be a departure from the Spa percentages. There had been eight conferences since that of Spa on the Reparations problem, but this was the first time any suggestion had been made that there should be any change or modification in the percentages then decided upon. The question had never been raised by the Dawes Scheme, and the experts had no authority to interfere with existing arrangements for the distri­bution of annuities. When the Young Committee was convened, it was agreed among the chief creditor Powers that there should be no interference with the Spa percentages.

"The effect of the reduction was very heavy upon some countries which did not share at all in the mobilisable part of the annuities. Great Britain would lose under the proposed scheme 48,000,000 marks a year. France, in addition to five-sixths of the unconditional annuities, would gain 10,700,000 marks, Italy 36,800,000 marks and Belgium 12,200,000 marks. Japan, Serbia, Greece and Rumania, and the United States would also lose small amounts.

"We have paid to the United States £150,000,000 which, with accrued interest, is now £200,000,000 before we have received any payments from our debtors on account of their debts to us. It is estimated that if the scale is adopted Great Britain will get just her bare debt to the United States covered. But it must be remembered that it makes no allowance whatever for the sum of £200,000,000 which is due to Great Britain under the terms of the Balfour Note."

I then touched on the question of payments in kind, and said Great Britain attached great importance to this question, adding:

" Our relations with Germany are very friendly commercially, and long may they continue so, but we compete in the markets of the world, and payments in kind therefore have assumed a great and serious importance.

" Forgive me if I appear to speak with great firmness in regard to the distribution of annuities. The House of Commons would never agree to any further sacrifices of British interests in this matter. We are agreed—and as you all know, all parties in Great Britain are agreed—upon this.

"We are prepared to wipe the slate clean of all international debts and all Reparations. That was implied in the Balfour Note. It was the declaration of our Party before we came into power. But so long as Reparations are paid and received, so long as debts are payable, every Government in Great Britain will insist upon Great Britain being fairly treated in this matter."

At the conclusion of my speech the Conference evidently felt that they had had as much for that session as they could comfortably digest, and a motion was made for the adjournment of the Conference.

To my surprise the speech, which contained nothing which ought to have surprised the delegates if they had been aware of the position of the British Government as stated in the House of Commons debate, caused a great sensation. The French, Italian and Belgian Delegations had evidently come to the Conference expecting no opposition to any of the recommendations of the Report. They had assumed that the business of the Conference would be confined to drafting a protocol laying down the conditions for putting the Plan into operation. As a matter of fact, I was appalled at the ignorance which was displayed by the Delegations of these countries. They had no appreciation at all of the contributions which Great Britain had made to France, Italy and Belgium in the settlement of their War Debts to this country.

The full Conference assembled next morning (Wednes­day, 7th August).    It was clear that the French, Italian and Belgian delegates had kept their officials up all night preparing statements for them, which were read to the Conference. The statements were moderate in tone, but emphatic that there could be no concessions by them on the demands I had put forward. The smaller Powers who suffered to some extent from the alteration of the Spa percentage were unanimous in their criticisms of the Report. There was, however, an underlying feeling that I had thrown out a challenge which would have to be taken up, and the speeches made that morning were obviously drafted to gain time for a further ex­ploration of the British case. At a reception given by the Dutch Government the previous evening my " bomb­shell " was almost the sole topic of conversation, and amongst neutrals the feeling was frankly expressed that the Conference would have to face up to the facts, and that a little plain speaking had been introduced into an International Conference which had been strikingly absent from the proceedings of previous Conferences.

The French and Italian Press were most violent in their remarks upon my speech, and were insistent that no sacrifice of the advantages which France and Italy derived from the Young Plan should be made.

On the next day (Thursday, 8th August) the Conference went into Commission. It had not been my intention to speak at the first meeting of the Finance Commission, but events made it necessary that I should make a second speech and repeat in stronger language the demands of the British Delegation. It had come to our knowledge that the statement was being widely circulated that I was simply bluffing, and that a strong line of opposition would expose the bluff. The Chairman of this Finance Committee really precipitated my second speech by proposing the setting up of a number of sub-committees to draft a protocol for the putting of the Plan into operation. This proposal I strongly opposed, and said that until the Conference had come to a decision upon the three demands made by the British Government it was useless to proceed to other business. I took advantage of this opportunity, also, to reply to the speech which had been made by M. Cheron the previous day in the plenary session. The following is a summary of the remarks I made on this occasion:

" Mr. Chairman, I quite agree with what you have said that it will be desirable to draw up a programme for the consideration of the Sub-Committees after we have got an idea of the points to which the Commission attaches importance. The Commis­sion will be aware from what I said the other day that there are two or three matters arising out of the Report to which the British Government attach supreme importance, and indeed I may emphasise what I said the other day by declaring now that the British Delegation must have an assurance that the three main points I raised the other day, namely, the distribution of the annuities, the unconditional part of the annuities and de­liveries in kind, must be considered and some decision must be reached before the British Delegation can take part in the discussion of any further matters arising out of the Report. The Experts' Report says in two or three places that the Government must accept the Young Plan in principle before they proceed to the appointment of certain Committees, such as the Committee to deal with the alteration of the German Laws and the Bank project, and one or two other matters.

" I hope my remarks will not be regarded as being in the least offensive if I say that there was no reply whatever given to any one of the arguments which I advanced, and no figure which I gave was challenged. Indeed all the speeches which were made yesterday purporting to be criticisms of my speech might be summarised in one sentence, namely, that we must accept the Young Report as a whole, that it is indivisible, that if any changes are made in the Report the whole structure will fall. . . .

"In regard to the first of these points we do not accept the statement of the Experts that the Report is indivisible. If that were so we should not be here at all. . . . But all the changes we have asked for could be made within the structure of the Plan without in the least undermining the foundations of that Report.

"What were the sacrifices to which M. Cheron referred, namely, that the amount of the annuities will be smaller than the amount which was fixed under the Dawes Plan. But I do not call that a sacrifice at all, because we are not making a sacrifice when we are giving up something which we should never have received. This is not a sacrifice at all, and even if it were a sacrifice it is a sacrifice which every one of the Creditor Powers is called upon to share proportionately. The French Finance Minister went so far as to claim as a sacrifice the loss of the prosperity index. That again is no sacrifice at all, but if we are to talk about sacrifices here then I have to say some­thing about the sacrifices which the British Empire has made. As a matter of fact there is not a single one of the countries which were engaged in the War which has made anything at all ap­proaching the financial sacrifices which Great Britain has made. . . . We have a war debt now of £7,500,000,000, which is more than double the war debt of any other nation which was engaged in the War. The taxation of our people is double per head of our population than of any other country that took part in the War. I have to provide 125,000,000 francs every day of the year for the service of our war debt."

I dwelt in considerable detail with the magnanimous character of our settlements with our late Allies, and laid stress upon the following fact:

"As a matter of fact, we settled with Italy a debt of £560,000,000 for a present value of £78,000,000, and if the pro­posal made in the Young Report were carried into effect we should have to sacrifice to Italy another £30,000,000 of that £78,000,000. Therefore all that we should get from Italy for a loan which at the time of funding amounted to £560,000,000 is in effect no more than £48,000,000.

"Therefore, if as a result of this Report we were called upon to make certain sacrifices, we should be perfectly within our moral rights if we insisted on a reconsideration of our present debt arrangements with them."

Turning to the distribution of the annuities, both con­ditional and unconditional, I repeated that "The Young Committee had no right whatever to interfere with the Spa percentages."

I concluded by saying:

" We must have a decision upon these questions before we proceed any further, and I wish to submit to the Commission a Resolution on this matter for which I shall ask approval . . .

" I have behind me the unanimous support of my Govern­ment, the support of the House of Commons irrespective of Party, and the support, I believe, of the whole of the people of Great Britain. Upon this matter I am speaking quite frankly. We cannot compromise . . .

" The Young Report states that before it can come into opera­tion it must be ratified by the Governments concerned, and I want to tell this Conference that the British House of Commons will never ratify this Young Report in the form in which it is at present. Suppose that we here were to accept it, supposing the British Government were to accept it, what would happen? We might go back to the House of Commons and submit it to the House of Commons, but the House of Commons would not accept it, the country would not accept it, and therefore all the work would have to be begun all over again, and I am quite sure that that is a situation which every one of us would deplore, and every effort should be made at this Conference to avoid such a catastrophe as that."

I submitted the following Resolution:

"That a Sub-Committee of Treasury Experts should be appointed to consider and submit proposals for the settlement of any questions raised in regard to the amount and the method of payment of the annuities provided for in the Young Plan, and (without the German representatives) to revise the scheme of distribution of these annuities so as to bring it into accord with the existing inter-Allied agreement."

This speech, as might have been expected, " put the cat among the pigeons ", and drew excited replies from the French and Belgian and Italian Delegations. In none of the speeches was any attempt made to deal with the arguments and statements I put forward.   They were in the main a repetition of the phrase—" the Young Report is an indivisible whole and we cannot admit any alteration of its recommendations ".

At the end of this meeting of the Financial Commission the divergence between Great Britain and the other Creditor Powers had become so marked that it was decided to adjourn for two days to see what might happen in the meantime. I agreed to this adjournment only on the condition that the next session should be devoted to a continuance of the general debate, and that Mr. Graham's speech on Deliveries in Kind should come first. The debate on Deliveries in Kind at this particular moment was really a time-killing arrangement while private con­sultations were going on behind the scenes on the questions I had insisted should be dealt with before other matters were discussed.

At this meeting, on Saturday the 10th, Mr. Graham made a clear statement of the British position on Deliv­eries in Kind. Mr. Graham's speech was moderate and persuasive, and it made a distinctly favourable impression upon the meeting.

At the conclusion of this speech, ignoring the fact that it had been agreed to confine the business of that session to the subject raised by Mr. Graham, M. Cheron rose, and without any remonstrance from the Chairman, said that he proposed to reply to the speech I had made two days before. He innocently confessed that he was doing this because the French Press had attacked him on account of the weakness and inadequacy of his earlier reply. This turn in the proceedings of the Commission had taken me completely by surprise, but I could not quite allow M. Cheron's speech to pass without an immediate reply. M. Cheron had read his long speech, and he evidently did not expect that I should reply to him at once. I was getting rather impatient with this constant repetition of statements which were no answer to the case that I had put forward, and I did not spare M. Cheron on this occasion. It was in the course of this speech that I used the expression which became notorious, and which M. Cheron has not lived down to this day. The following is an extract from what I said:

" I hope that I shall not be considered discourteous if I say that M. Cheron's speech has taken me somewhat by surprise. I understood that the sitting was to be devoted wholly to the question of Deliveries in Kind. But M. Cheron has replied to what I said when I spoke on Wednesday. Had this been a con­tinuation of the general debate on the whole Plan, I should have had no complaint to make about the nature of M. Cheron's intervention this morning.

"I am not going to follow M. Cheron in the points he has made, and particularly in the figures he has submitted to the Committee. I will practically confine myself to saying that I do not accept the accuracy of a single figure M. Cheron has put forward. If this were the occasion for going into details on this matter I should refute every one of the constructions which M. Cheron has placed upon his figures. It is not true to say that Great Britain did not suffer, in the proposed distribution, under the Young Plan in comparison with the distribution which she received under existing agreements. I hope that the word will not be considered offensive, but M. Cheron's inter­pretation of the Balfour Note is grotesque and ridiculous to any­one who understands its full character.

" It is no good going on arguing the question day after day in the Committee, one side repeating its arguments and the other side repeating its claims. It is high time that we came to grips with this matter. I have not come here to spend the rest of my days at The Hague. I want to get back to my own country. I am as anxious as any member of the Committee to come to an agreement which will be mutually satisfactory and which will place this vexed question upon a permanent foundation. But there can be no settlement unless it is a settlement based upon justice. This general debate will have to come to a close very soon. My resolution is before the Committee, and I cannot delay a decision upon that resolution very much longer."

At the close of my speech a number of delegates rose to continue the discussion, but the Chairman was of opinion that the atmosphere had become so electric that it would be well to adjourn the Conference until the debate could be continued in a calmer spirit.

After the adjournment of the Conference there was a violent reaction on the part of the French to the words " grotesque and ridiculous " which I had used in describ­ing M. Cheron's interpretation of the Balfour Note. Although these words were not used by the interpreter in translating my speech into French (he had translated in their place the milder expression of " wholly in­accurate "), the actual words I had used became known. They were seized upon by the Press correspondents, and were prominently displayed in the Paris Press next morn­ing. This storm was apparently due to one of those differences in the precise meaning in the two languages of words which are identical in form. But I learnt afterwards that the reason why M. Cheron was so in­dignant at the use of this expression was because he was habitually cartooned by his political opponents in the French Press in the character of a clown.

A story is told that during a recent political crisis in Paris, there was a demonstration of students in protest against the part M. Cheron was supposed to have taken in overthrowing the previous Government. During this street demonstration the students encountered M. Cheron, seized him, and compelled him to sit down in the middle of the street. They drew a circle round him, and danced around singing: "You are grotesque and ridiculous! " Only those who know M. Cheron could imagine the full humour of that situation.

During that week-end I had a visit from two of M. Cheron's seconds, who came to demand from me an explanation of my  language.    I  had no  difficulty  in assuring them that the words in English had not the offensive meaning they had in French, and were a common Parliamentary expression. At a meeting of the principal delegates next morning, called for other business, there was a delightful exchange of courtesies between M. Cheron and myself which cleared up this incident and put everybody into good humour once more.

That same Saturday afternoon an embarrassing episode occurred which might have had the effect of breaking up the Conference altogether. It appears that on this Saturday afternoon in Edinburgh Mr. MacDonald had had a long interview with two international bankers, who had impressed upon him that there was a danger that my opposition to the French might lead them to take re­taliatory action against Great Britain by withdrawing French francs deposited in London.

At the end of this interview Mr. MacDonald sent the following open telegram addressed to " The Treasury, London."

"Prime Minister, Edinburgh to Treasury. " Most Urgent.

" Send to Chancellor at Hague in code immediately.

"My information is worsening from all sides: even an ad­journment strikes in minds of important people an ominous note. I am relying upon three of you before break occurs to get into touch with me and perhaps we could arrange to meet before any action for adjournment is taken or if you prefer that one of you should meet me in London.

"Prime Minister."

This telegram reached the Treasury at three o'clock on Saturday afternoon. There was no responsible official at the Treasury on duty at that time, and the telegram fell into the hands of a young clerk who opened it.   He discovered that the telephone girl on duty was not in possession of a copy of the code, so he rang up the British Delegation at The Hague, and he read the contents of the telegram to an official of the British Delegation there.

When it became known to us that this telegram had been telephoned to The Hague en clair we were staggered at the possible consequences. It was well known to us that the telephone lines were being tapped, and it was highly probable that the contents of this important message would soon be known to all the Press corres­pondents at The Hague. As a matter of fact, the news­papers next morning had an account of the long interview between the Prime Minister and the bankers in Edinburgh. If this message from him to me became known to the delegates of the other Powers it would confirm the widespread impression that I was simply bluffing and had not the support of the British Government in insisting upon the demands I had made.

I immediately sent the following message to the Prime Minister. After quoting the terms of the telephoned message, I said:

"This message was read over the telephone en clair by some officer in London to a junior Foreign Office official at the, Dele­gation Office here. It looks as if a serious error of judgment has been committed in London and this I am investigating at once. But in the meantime I should like to know whether your telegram from Edinburgh to Treasury was also sent en clair. The consequences of any leakage of this message may be disas­trous. So far my main task has been to convince the foreign delegations that I am not bluffing and have been speaking with the full authority of His Majesty's Government and with the complete approval of the country at large. Yesterday there seemed every indication that this lesson had at last been learnt and distinct signs of cracking have been shown by both French and Belgians. To-day, as appears in the letter which I had already written before this telephone message was received and which goes by to-night's bag, there has been a very marked stiffening. The reason for this I have not so far discovered. Of course, the fact of this message having been sent and its tenour are bound to become known to other delegations, and I very much fear that my task of reconciling the Young Plan with British interests has become almost impossible. The only chance seems to me immediate issue by you of a statement that I have the fullest support both of yourself and of every member of the Government in the position which I have taken up and which I intend to maintain."

The Prime Minister responded immediately with this communication:

" The Financial Commission will make a most serious mistake and may wreck immediate prospects of a settlement unless they understand quite finally that the Experts' Report requires re­adjustment to meet the just claims of this country. Irrespective of party or section the country supports the case you have made. Every newspaper so far as I have seen backs you. All parties in House of Commons stand by you. I hope most sincerely your colleagues on the Financial Commission will see that they have to face a position when the most elementary considerations of fair-play as between country and country compel a reconsidera­tion of some of the recommendations of the Report. Our action hitherto in promoting the settlement of Europe on a basis of good-will is a proof that we wish this Conference to succeed both on its political and financial sides, but we have reached the limits of inequitable burden-bearing."

On the receipt of the Prime Minister's communication I got in touch with M. Jaspar, and told him that I pro­posed to read this at the meeting of the Financial Com­mission to be held on Monday. M. Jaspar, however, urged that I should not do this as " the patient is so weak that this will kill him ". I gathered from this remark that the foreign delegates were still under the impression that I was bluffing, and that to be suddenly disillusioned might give them a fatal shock. However, I did not wait until Monday, but gave the Prime Minister's message to the Press at once, and it certainly produced a marked effect upon the French delegates. For some days previous there had been rumours among the Press correspondents that M. Briand had appealed to Mr. MacDonald to come to The Hague and take charge of the British Delegation, or, failing that, M. Briand was in favour of an adjournment of the Conference to Geneva in the hope that Mr. MacDonald would be more amenable. On Monday, however, it became clear that Mr. Mac-Donald's original telegram had leaked out, and among the Press correspondents there was a general talk to the effect that a private message from the Prime Minister had been received instructing the British Delegation to climb down. The intractable attitude of the foreign delegates during the whole of the following week was undoubtedly due to their knowledge of the Prime Minister's first telegram.

At the end of the first week of the Conference the out­look was black. The French, Belgian and Italian dele­gates showed no disposition to meet us on the demands I had put forward. It had been arranged that the Finan­cial Commission should resume its meetings on Monday (12th August) to continue the debate on Deliveries in Kind. But it was realised that this was a mere pretence to keep the Commission in existence. In these cir­cumstances it was felt that if any progress was to be made on the matter which was holding up the Conference the principal delegates would have to meet privately and discuss the situation. At my interview with M. Jaspar on Saturday afternoon I suggested that the principal dele­gates should meet on Sunday morning to talk over matters. The meeting was to be strictly private, and no secretaries or officials, apart from the Secretary-General, should be present. But before this meeting took place I had arranged with M. Jaspar that the British, French, Belgian, Italian and Japanese Experts should meet informally to discuss how the British claims could be met.   This was the first real advance in the way of acknowledging the substance of the British claims. The Sunday morning meeting, therefore, was of a perfunctory nature, the only incident of importance being the clearing up of the misunderstanding about the " grotesque and ridiculous " incident, and the exchange of courtesies between M. Cheron and myself. The meeting, however, was useful as it put everybody in a good humour and restored a favourable atmosphere.

The informal meetings of the Experts began at once to consider in what way the demands of the British could be met. From that time the Financial Commission